Are Credit Cards Bad?

We are often asked, “Are credit cards bad?” Our answer to that question is always, “That depends on how you use them.”

Much like a handgun, credit cards can be devastating in the hands of someone who has not been trained to use them properly and responsibly. They have been known to ruin credit, end marriages, cause job loss, and could even result in death if the stress of repayment is that severe.

On the other hand, credit cards have been a lifesaver to those in financial need, in case of an emergency, and are a great convenience to many shoppers, especially those who purchase from the Internet. Websites such as Amazon.com, eBay.com, and many others probably wouldn’t exist if users couldn’t purchase with their credit cards.

It is unfortunate that many young people are graduating from high school with no idea of how to handle money and debt responsibly. However, it is never too late to learn some sound money management skills and take back control of your credit cards. Here are three principles that should always be followed before pulling out the plastic:

Never spend more then you can pay back – Like we’ve said before, using credit cards isn’t necessarily bad, however, paying interest is. If you can’t afford to pay your credit card bill at the end of the month, then you are at risk of abusing debt. As financial author Ron Blue has said, “The only way to stay financially free is to spend less than you earn and do it for a long period of time.”

If for any reason you can’t pay off your credit card bill at the end of the month, put it away until you can. One of the greatest dangers is compounding your debt, piling more debt on top of more debt, and compounding interest.

Never use it for unplanned purchases – Purchases with credit cards should be planned in advance and premeditated. Impulse purchases are the enemy! The convenience of credit cards is what causes so many people to lose control and receive the shock of their lives when they get their statements at the end of the month.

By planning ALL of your purchases in advance, you can be sure that you are able to pay off the bill, in full, at the end of the month. Also, by only buying planned-for items you will be able to control your impulse spending.

If there is something that you see at the store that you ‘must have’ go home and think about it for a day. Chances are after having time to cool off a bit that item won’t look as glamorous and you will have saved yourself some dough.

Use only in emergencies – If you are the type that absolutely cannot control your credit card spending but need to carry one in case of an emergency, such as your car breaking down, it may be wiser to keep it locked up in your car instead of carrying it in your wallet or purse. By not having your credit card on you when you’re walking through the mall you are much less likely to use it. Is the item that you’re looking at buying really worth it for you to walk all the way out to your car, get in the glove box, and walk all the way back into the mall to buy something. Most times, probably not.

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